It could have been worse. Come to think of it, it probably will be worse.

You may have noticed that here in the U.S. of A., we've stumbled into an economic sticky wicket. Spending's spun outta control, and budgets must tighten. Last year, the Pentagon embarked upon a series of spending cuts. And few months back, we saw a worst-case scenario proposed, in which the Pentagon might slash defense spending by $1 trillion dollars over the next decade ... but that's not the end of it.

Turns out, the same issues we're facing here in the Colonies have touched the Motherland as well. Over in Britain, a "Strategic Defence and Security Review" and "Comprehensive Spending Review" are both due out next week, and expected to recommend cutting British defense spending by about 10% ($6 billion) over the next four years.

For the most part, local European defense contractors Thales, EADS, and BAE will take the biggest hits to Euro-defense pare-backs. But don't be Fooled: American firms are at risk as well. In particular: Lockheed Martin (NYSE: LMT) could lose some of its expected 138 F-35 fighter jet sales.

Meanwhile, British generals are wondering whether General Dynamics' (NYSE: GD) new "Future Rapid Effect System" armored vehicle program, valued at $6.4 billion, still makes sense in a Soviet Union-less world.

Not all bad news
Less at risk, I suspect are the $300 million in revenues Force Protection (Nasdaq: FRPT) hopes to reap from its win of a contract to build Ocelot armored cars for the U.K. MoD. Force landed the contract just last month. It would seem silly to turn around and cancel it now. Similarly, as part of NATO, Britain will be anteing up to help buy eight Global Hawks built by Northrop Grumman (NYSE: NOC) and Raytheon (NYSE: RTN). The ink on that contract is only a few months old, and I doubt they've had time to rethink it.

What's more, the news good be good for at least one company: Boeing (NYSE: BA). One UK defense project that's been hanging by a particularly thin thread is the plan to buy 25 A400M transport aircraft to bolster Britain's airlift capabilities. Unfortunately for A400M builder EADS, its plane is years overdue and billions overbudget. Britain's already threatened to abandon the A400M if EADS doesn't get its act together, and may buy Boeing C-17 Globemaster transports instead. Now, with budget constraints looming, it's got the perfect excuse to buy a proven plane, at a prudent price.

More defense investing Foolishness:

General Dynamics is a Motley Fool Inside Value selection, but Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.

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